Warren Buffett - "stop coddling the super-rich"

[Lurker765]

The richest individuals don't pay a lower tax rate than median individuals. The top 1% of all earners pay 38% of all federal income taxes while earning 20% of the income. They pay an average tax rate of 23.27%. The top 5% earn 34.73% of all income and pay 58.72% of all income taxes at a 20.7% average rate. The top 50% earn 87.25% of all income and pay 97.3% of all income taxes at an average rate of 13.65%. The bottom 50% earn 12.75% of all income and pay 2.7% of all income taxes at an average rate of about 2.6%

Warren Buffett, who has basically turned into a rich shill for Obama, hasn't even stated it close to accurately. The numbers don't lie. We have a highly progressive income tax system. The top 1% pay a ratio of 1.9 times their share of income to tax burden. The bottom 50% pay a ratio of roughly 0.2 times their share of income to tax burden. The top 50% pay just a bit over 1:1.

Explain to me how that's not progressive.

Ummm....that is what we have been talking about in this thread.

If you make all your money on investments (which is what the super-rich do) then you are in the 15% tax bracket. Not the 38% tax bracket.

Do you think Buffett is super-rich because of his $100,000 salary with Berkshire Hathaway or because of his investments? That is why his tax rate is 17% and lower than everyone in his office despite making millions more each year than they do.

[cardboardbox]

Thanks for the reply.

When you say a flat tax, would you still include deductions for things like education, medical costs, mortgages, charity, etc.? What about capital gains, which are only taxed at 15% right now?

The reality is that any flat tax rate would have to be near 20% to be sustainable. So what this effectively means is that the tax rate for lower incomes will go up (from the current 15%), while those from the higher incomes (now 35%) will be reduced. This basically shifts more of the tax burden from the rich to the poor. And of course, the marginal value of a dollar is much greater for lower incomes, so they get hurt more that way too.

What is the goal of a flat tax? Is it just to simplify the tax collection process? Or is it to adjust the tax burden for different parts of society? I think it is clear that a flat tax would greatly shift the tax burden even further on those with lower income. Is that really your goal ?

Like I said in the post you replied to, I'd like a flat-ish tax but I'm ok with progressive rates for now, even Clinton rates, so I'm not sure why you are latching on to just the flat tax part of what I posted. The goal is to simplify the tax code, make it more fair (because I dont think its fair for half the country to pay no taxes, some of them getting welfare from the tax code), and to make the economy stronger. We would take in less taxes so its not feasible right now.

You say a flat tax "basically shifts more of the tax burden from the rich to the poor" and "would greatly shift the tax burden even further on those with lower income" but right now the poor have either $0 tax burden or they are burdened with the IRS giving them free money. Unless by poor you mean middle class?

If we didnt tax the first $35,000, and the rest was at 20%, effective rates would still be progressive, just flatter:
$10,000/yr 0%
$20,000/yr 0%
$30,000/yr 0%
$40,000/yr 2.5%
$50,000/yr 6%
$60,000/yr 8.3%
$70,000/yr 10%
$80,000/yr 11.25%
$90,000/yr 12.22%
$100,000/yr 13%
$125000 14.40%
$150000 15.33%
$175000 16.00%
$200000 16.50%

We'd probably need to work in some of the deductions you mentioned and that might lower the no tax threshold but in order to simplify, not all deductions/loopholes will would make it to the new tax code.

[DMT]

Guys, there's no point in convincing chance with numbers and logic; he understands taxation better than the richest man in America and he's certainly not going to listen to any 'rich shill for Obama'. Sorry, chance, but your responses in this thread are completely missing the point and seemingly deliberately so.

[cardboardbox]

But if the $250,000 year guy is a doctor and the $1 million+ guy is an investor, the doctor is paying a significantly higher percentage of his income in taxes than the investor, because the capital gains tax rates for the rich are so much lower than the earned income tax rates for the rich.

simple solution, lower the doctor's tax rate.

[Lurker765]

simple solution, lower the doctor's tax rate.

Lower the doctor's rate below 15%?

[OaklandA's]

The goal is to simplify the tax code, make it more fair (because I dont think its fair for half the country to pay no taxes, some of them getting welfare from the tax code), and to make the economy stronger.

You keep mentioning this point about too many people paying no taxes. The reason is because they have very little income! One-third of the returns have an AGI below the threshold - the same would be true with your proposed tax structure of 30K. Do you think these low income earners are avoiding income tax by hiring fancy accountants to hide their money?

[OaklandA's]

We have a highly progressive income tax system. The top 1% pay a ratio of 1.9 times their share of income to tax burden. The bottom 50% pay a ratio of roughly 0.2 times their share of income to tax burden. The top 50% pay just a bit over 1:1.

Explain to me how that's not progressive.

Please read my Post #33. How much share each group pays has NOTHING to do with anything. It is just a function of how many people, or technically how much income, falls into each bracket. If more people fall into the lower bracket, or more people move into the top bracket, how does that make the tax code more or less progressive?

[Mithrandir]

You keep mentioning this point about too many people paying no taxes. The reason is because they have very little income! One-third of the returns have an AGI below the threshold - the same would be true with your proposed tax structure of 30K. Do you think these low income earners are avoiding income tax by hiring fancy accountants to hide their money?

I'm not!!

[cardboardbox]

You keep mentioning this point about too many people paying no taxes. The reason is because they have very little income! One-third of the returns have an AGI below the threshold - the same would be true with your proposed tax structure of 30K. Do you think these low income earners are avoiding income tax by hiring fancy accountants to hide their money?

One third not paying taxes is far from one half. I'm quite ok with someone on an income of 30k not paying federal income tax.

Do you think 0% tax rate for 30k would increase their tax burden as you previously said? Or the 6% on 50k?

[Lurker765]

Please read my Post #33. How much share each group pays has NOTHING to do with anything. It is just a function of how many people, or technically how much income, falls into each bracket. If more people fall into the lower bracket, or more people move into the top bracket, how does that make the tax code more or less progressive?

I still want to hear how a 15% tax bracket for the richest of the rich is progressive.

I guess it is progressive compared to me. I am in the upper middle class and had stock sales the last two years. Due to deductions (mortgage, kids, etc) I landed in the 0% tax bracket for capital gains. That's right -- as a family who makes above the median US salary I paid ZERO taxes on my stock sales. Zip. Nada. Pure profit.

Why this money isn't taxed is incredible to me. The mantra of driving investments is false. The mantra of rich people taking their money elsewhere is pretty false since they won't be investing in countries with even higher rates such as the EU, Japan, Canada, etc. They won't be investing in third world countries that have shady legal systems or rampant corruption. They won't invest in countries like Venezuela that might socialize the companies.

We stand to lose investors more from our credit rating defaulting or being lowered than we do from raising the capital gains tax rate to progressive levels to raise funds to assist in paying off our debt.

Obviously we need to reign in spending since that is the main problem. But the capital gains tax rate is a sham.

[Lucky]

I still want to hear how a 15% tax bracket for the richest of the rich is progressive.

I guess it is progressive compared to me. I am in the upper middle class and had stock sales the last two years. Due to deductions (mortgage, kids, etc) I landed in the 0% tax bracket for capital gains. That's right -- as a family who makes above the median US salary I paid ZERO taxes on my stock sales. Zip. Nada. Pure profit.

Why this money isn't taxed is incredible to me. The mantra of driving investments is false. The mantra of rich people taking their money elsewhere is pretty false since they won't be investing in countries with even higher rates such as the EU, Japan, Canada, etc. They won't be investing in third world countries that have shady legal systems or rampant corruption. They won't invest in countries like Venezuela that might socialize the companies.

We stand to lose investors more from our credit rating defaulting or being lowered than we do from raising the capital gains tax rate to progressive levels to raise funds to assist in paying off our debt.

Obviously we need to reign in spending since that is the main problem. But the capital gains tax rate is a sham.

I think this is a very interesting and enlightening post from someone who actually has capital gains as part of his income. Hearing from people who are actually in the shoes of the hypothetical situations we talk about is very informative, IMO.

Thank you for sharing your personal experiences with us.

[Lucky]

Like I said in the post you replied to, I'd like a flat-ish tax but I'm ok with progressive rates for now, even Clinton rates, so I'm not sure why you are latching on to just the flat tax part of what I posted. The goal is to simplify the tax code, make it more fair (because I dont think its fair for half the country to pay no taxes, some of them getting welfare from the tax code), and to make the economy stronger. We would take in less taxes so its not feasible right now.

You say a flat tax "basically shifts more of the tax burden from the rich to the poor" and "would greatly shift the tax burden even further on those with lower income" but right now the poor have either $0 tax burden or they are burdened with the IRS giving them free money. Unless by poor you mean middle class?

If we didnt tax the first $35,000, and the rest was at 20%, effective rates would still be progressive, just flatter:
$10,000/yr 0%
$20,000/yr 0%
$30,000/yr 0%
$40,000/yr 2.5%
$50,000/yr 6%
$60,000/yr 8.3%
$70,000/yr 10%
$80,000/yr 11.25%
$90,000/yr 12.22%
$100,000/yr 13%
$125000 14.40%
$150000 15.33%
$175000 16.00%
$200000 16.50%

We'd probably need to work in some of the deductions you mentioned and that might lower the no tax threshold but in order to simplify, not all deductions/loopholes will would make it to the new tax code.

This "flat-ish" tax approach is intriguing, as it relates to income groups under $200,000. I could be persuaded to go along with this. I may have just missed it, but what happens about $200,000?

[TranaGreg]

One third not paying taxes is far from one half.

I was rather surprised by the half comment so did a bit of googling ... the number is 47% - amazing! In the interests of full disclosure tho ...

The vast majority of people who escape federal income taxes still pay other taxes, including federal payroll taxes that fund Social Security and Medicare, and excise taxes on gasoline, aviation, alcohol and cigarettes. Many also pay state or local taxes on sales, income and property.

Read more: http://www.businessinsider.com/only-...#ixzz1VP1csOnY

[cardboardbox]

This "flat-ish" tax approach is intriguing, as it relates to income groups under $200,000. I could be persuaded to go along with this. I may have just missed it, but what happens about $200,000?

nothing, I just figured the post was getting long enough. At some income level(s) I'd add another 2% to the rate.

[OaklandA's]

One third not paying taxes is far from one half. I'm quite ok with someone on an income of 30k not paying federal income tax.

Well, one-third are already below the threshold. The other 14% drop below the threshold once they factor in the appropriate exemptions, credits, deductions, etc. How much money do you expect to get from those from $30-50K and two kids?